Although individuals are permitted to enter into contracts freely in the United States, certain contract terms are expressly prohibited from employment contracts. Unfair labour practices, which are defined and governed by the National Labor Relations Act (NLRA), are also prohibited from being included in employment contracts. An employment contract that contains unfair terms or unfair practices may be invalidated by the court.
Any contract for employment that has unlimited or limitless duration, or that otherwise fails to specify a duration is invalid. To be considered a fair and legally actionable contract, an employment contract must include a specified duration, such as "for six months" or "until completion of the project."
Any contract for employment below the federal minimum wage, or the state minimum wage if it his higher than the federally mandated minimum wage, is invalid. To be considered a fair and legally actionable contract, an employment contract must pay the employee the federal or state minimum wage, whichever is higher. Employment contracts must also follow state and federal laws for overtime, time off and other labour issues.
Employment contracts that are grossly one-sided or where the employer has clearly taken advantage of an unsuspecting employee are unfair and invalid. For example, an employer cannot exploit an employees desperation to have or keep a job.